Focus Market Scheme

The Focus Market Scheme (FMS) was an export promotion initiative introduced by the Government of India under the Foreign Trade Policy (FTP) 2004–2009 and continued in subsequent years to enhance the competitiveness of Indian exports. Its primary objective was to diversify India’s export markets by providing incentives to exporters who shipped goods to specified countries where Indian exports were relatively low or untapped.

Background and Introduction

Launched on 1 April 2006 by the Ministry of Commerce and Industry, the Focus Market Scheme was formulated by the Directorate General of Foreign Trade (DGFT). It was introduced as part of a broader effort to expand India’s trade reach beyond traditional markets such as the United States, the European Union, and Japan.
The FMS sought to encourage exporters to explore new and emerging markets in Latin America, Africa, the Commonwealth of Independent States (CIS), and Eastern Europe, thereby reducing overdependence on a few major trading partners.

Objectives of the Focus Market Scheme

The key objectives of the scheme were:

1. Market Diversification: To promote exports to countries where India’s market share was small but had potential for growth.
2. Export Promotion: To enhance India’s competitiveness by reducing transaction and marketing costs in new markets.
3. Employment Generation: To encourage export-led growth in labour-intensive sectors such as textiles, handicrafts, and engineering goods.
4. Reducing Regional Imbalance: To help industries located in smaller towns and states gain access to non-traditional global markets.

Features of the Scheme

• The scheme granted duty credit scrips to exporters equivalent to a fixed percentage (usually 3%) of the Free on Board (FOB) value of their exports to notified countries.
• These scrips could be used to offset customs duty on the import of inputs or goods, thereby lowering production costs.
• The benefits were available for exports of all notified products (excluding a few items such as precious metals and certain petroleum products).
• The scheme operated under the Foreign Trade Policy’s Chapter 3, alongside similar schemes like the Focus Product Scheme (FPS) and the Market Linked Focus Product Scheme (MLFPS).

Coverage and Market Selection

The DGFT periodically notified a list of eligible markets (countries) under the FMS based on trade data and export potential. These markets were typically non-traditional destinations where Indian exports faced higher trade barriers, logistical challenges, or lower market penetration.
The markets were categorised broadly into:

• Latin American and Caribbean countries (e.g., Brazil, Chile, Mexico).
• African countries (e.g., South Africa, Kenya, Nigeria).
• CIS countries (e.g., Russia, Ukraine, Kazakhstan).
• Eastern Europe and Central Asia.

The list of eligible countries was revised periodically by DGFT through notifications.

Operational Mechanism

1. Eligibility: Exporters of goods (excluding certain prohibited or restricted items) to notified countries were eligible for benefits.
2. Application Process:
   • Exporters filed applications online through the DGFT portal within a prescribed time period after realisation of export proceeds.
   • Supporting documents such as Shipping Bills, Bank Realisation Certificates (BRCs), and Export Promotion copies were required.
3. Issuance of Duty Credit Scrips:
   • On verification, DGFT issued duty credit scrips equivalent to 3% of the FOB export value.
   • These scrips were freely transferable and could be sold or used for payment of import duties.
4. Usage of Scrips:
   • Payment of Basic Customs Duty (BCD) on import of raw materials, machinery, or other inputs.
   • Import of goods required for export production without incurring additional costs.

Example

If an exporter shipped goods worth ₹10 crore (FOB value) to an eligible country under the FMS, he would receive a duty credit scrip worth ₹30 lakh (3% of ₹10 crore). This scrip could then be used to offset customs duty on imports or sold in the open market.

Complementary Schemes

The Focus Market Scheme operated in tandem with:

• Focus Product Scheme (FPS): Provided export incentives for specific products with high employment potential.
• Market Linked Focus Product Scheme (MLFPS): Targeted select products exported to specific high-potential markets.
• Vishesh Krishi and Gram Udyog Yojana (VKGUY): Promoted exports of agricultural and village industry products.

Together, these schemes aimed to boost overall export performance by combining product-based and market-based incentives.

Benefits of the Scheme

• Enhanced Market Reach: Encouraged exporters to venture into less-explored regions such as Africa and Latin America.
• Cost Competitiveness: Reduced export and import costs through customs duty benefits.
• Employment Creation: Stimulated labour-intensive sectors, generating rural and semi-urban employment.
• Diversified Trade Profile: Reduced India’s reliance on traditional markets, making its exports more resilient to global demand fluctuations.

Limitations and Criticisms

Despite its success, the Focus Market Scheme faced certain limitations:

• Limited Impact on Trade Balance: The incentives were modest and did not significantly alter export patterns in high-value sectors.
• Administrative Delays: Lengthy verification and approval processes often delayed scrip issuance.
• WTO Compliance Concerns: The scheme was criticised for being inconsistent with World Trade Organization (WTO) rules on export subsidies.
• Overlap with Other Schemes: Multiple overlapping schemes created confusion and administrative burden for exporters.

Phase-out and Replacement

With the revision of the Foreign Trade Policy (2015–2020), the Government of India merged and replaced earlier export incentive schemes, including FMS, under a new umbrella initiative called the Merchandise Exports from India Scheme (MEIS).

• Under MEIS, exporters received duty credit scrips ranging from 2% to 5% of the FOB value, based on product and destination country.
• The MEIS further simplified the process and aligned it with international trade norms.
• In 2021, MEIS itself was replaced by the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, which provides WTO-compliant refunds of embedded taxes.

Significance and Legacy

The Focus Market Scheme played a pioneering role in shaping India’s export diversification strategy. It helped:

• Build trade relations with new regions such as Africa and Latin America.
• Lay the foundation for subsequent export incentive programmes.
• Increase awareness among small and medium exporters about global opportunities.